The following article was distributed to members of the Tennessee Land Title Association.
In the long-running television game show “The Price is Right,” making your best pricing guess without going over the actual amount might make you a winner. While a “best guess” might work in Hollywood, the name of the game in the real estate settlement process is accuracy—to make sure your premium calculation is neither over nor under. The American Land Title Association’s (ALTA’s) Best Practices Pillar #4 addresses pricing along with document recording, which are two components necessary to ensure a compliant settlement process.
Pillar #4 requires title companies to “adopt standard real estate settlement procedures and policies that help ensure compliance with Federal and State Consumer Financial Laws as applicable to the Settlement Process.” There are two procedural components related to Pillar #4 to ensure that the settlement is in compliance with ALTA’s Best Practices.
The first component focuses on the recording portion of the settlement. Legal and contractual requirements should be reviewed to determine your obligations to record documents, and then incorporated in your written policies and procedures. Including the following measures will help ensure your policies and procedures are compliant with Pillar #4:
- Submit documents for recording within two business days of the later of (i) the date of Settlement or (ii) the receipt of the documents by your company if Settlement is not performed by your company.
- Log all documents that are required to be recorded with the date and time of submission.
- Address recording rejections within two business days of receipt of the rejected documents by promptly forwarding the rejected documents to the escrow officer responsible for recording those documents (or manager if the escrow officer is unavailable).
- Verify that recordation of the documents actually occurs and is maintained in a tracking log.
The second component is all about the pricing in connection with the settlement. Your company’s written procedures should include a method for reviewing title commitments to ensure that the premiums are calculated correctly. The following measures should also be included to ensure compliance with Pillar #4:
- Adopt a written set of standard real estate settlement policies and procedures where charges comply with current filed or publicized rates, endorsements, and/or rates established by the company’s title insurance underwriters or rating bureau in each state where you do business.
- Issue payments upon discovery where overpayments occur.
ALTA’s Best Practices Task Force has released, for its members, the third “Assessment Readiness Guide” for Pillar #4, in addition to guides for Pillars #1 and #7. These guides are available for members at (http://www.alta.org/bestpractices/documents.cfm). The Task Force will roll out guides for the remaining Pillars in the coming weeks.
The guide for Pillar #4, which is divided into three parts, addresses adopting real estate settlement policies and procedures that help ensure compliance with Federal and State Consumer Financial Laws, which apply to the settlement process. Part 1 of the Pillar #4 guide requires you to document business and demographic information, including the use of any third parties’ services. Part 2 is a questionnaire asking specific questions about your procedures over the settlement process as they pertain to Best Practices. In addition, there is suggested testing to perform to ensure that your company is in compliance with ALTA’s Best Practices. Part 3 includes an appendix that provides a template for documenting your policies and procedures and a sample Title Insurance Premium Rate Information form.
If your company has not already begun implementing or performing the self-assessment, you should start soon. ALTA has issued a challenge to its members to complete the self-assessment by September 2014. Even without an independent third-party certification, ALTA is encouraging its members (once they have performed a passing self-assessment) to communicate their compliance with their lending customers.
Although there are added benefits in communicating your compliance with ALTA’s Best Practices with your lending customers, ensuring a compliant settlement should be the primary reason. A well-developed set of policies and procedures over document recording and pricing can help your company reduce the probability of delivering a substandard settlement experience, which is bad for business. With that said, “the price is right” to adopt Pillar #4.
If you have questions about ALTA Best Practices services or would like to request a speaker on this topic, contact Debra Gentry at (800) 270-9629.